Black business owners declined by 41% from February to April 2020, the period of the initial financial impact of the coronavirus crisis, largely because of several factors, including that areas with high volume of virus infections coincided with Black-owned business locations, according to a paper released this week.
The brief published by the Federal Reserve Bank of New York asserted that the decline in the number of Black owners of businesses was the most acute across racial and ethnic groups as the financial impact of the coronavirus became apparent. According to the Fed, Latinx business owners declined by 32% and Asian business owners dropped by 26%. The number of white business owners, by contrast, fell by 17%, the brief stated.
In reaching its findings, the New York Fed said it relied on a variety of sources, including: epidemiological data on COVID-19 cases, Census data on business locations, data on the geographic reach of the Paycheck Protection Program (PPP), and data on small firms’ financial health from the Federal Reserve’s Small Business Credit Survey. The New York Fed said it used the sources to examine connections between COVID-19 incidence, policy interventions, and business survival rates.
Among the specific findings:
- Two-thirds of counties with high levels of Black business activity pre-COVID-19 are in the top 50 COVID-affected areas. Data from counties nationwide show Black-owned firms are more likely to be located in COVID-19 hot spots, whereas white-owned firms are less likely to be in the most heavily affected areas.
- The Small Business Administration’s (SBA) Paycheck Protection Program (PPP), has left significant coverage gaps. “These loans reached only 20% of eligible firms in states with the highest densities of Black-owned firms, and in counties with the densest Black-owned business activity, coverage rates were typically lower than 20%,” the New York Fed said.
- Weaker cash positions, weaker bank relationships, and preexisting funding gaps left Black firms with little cushion entering the crisis. “Even the healthiest Black firms were financially disadvantaged at the onset of COVID-19,” according to the brief.